The National Association of Insurance Commissioners has put off approving its controversial Insurance Receivership Model Act (IRMA) to give insurance industry representatives one last chance to suggest revisions.
The Financial Condition Committee will continue to receive comments over the next few weeks in time for another interim meeting in August before its expected final approval at the September NAIC fall meeting.
At a hearing yesterday at the NAIC summer meeting in Boston, industry representatives were unanimous in their criticism of the model act that will address the priority of interests of all stakeholders in insurance company insolvency such as the guaranty fund, creditors, estates and policyholders.
Debra Hall, senior vice president for the Reinsurance Association of America, said the proposed legislation "failed the fundamental test of fairness."
"In many instances the model grants the receiver unfettered discretion without judicial or regulatory oversight," she said.
Specifically, her reinsurance concerns centered on the fact that receivers could seek not only reported claims but also those that have been incurred but not reported. "The provision treats these fundamentally different categories of loss reserves as though they were the same," she said.
Michael Koziol, assistant general counsel for the Property Casualty Insurers Association of American (PCI), said the intent of IRMA is to ease the administrator's burden of the estate and protect the receiver. "The model loses sight of accountability by granting immunity to receivers and contractors," Mr. Koziol said.
Mr. Koziol also asserted that the model grants liquidators powers "that a bankruptcy judge would marvel at in the way it allows them to circumvent the priority regime."
The proposed act would replace the current receivership model that in its nearly 20 years of existence has yet to be adopted in its entirety in any state.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.